OVERSEAS-BUYERS-THE-CAUSE-OF-SKYROCKETING-UK-HOUSE-PRICES

OVERSEAS BUYERS THE CAUSE OF SKYROCKETING UK HOUSE PRICES

23.04.18

Foreign real estate investment has pushed up home prices by more than a quarter in the UK, according to a study by King’s College London (KCL).

The most recent data shows that, had there been no foreign investment, average home prices would have hovered around £174,000 by 2014. The influx of foreign money, however, caused them to soar to £215,000 in 2014, from just £70,000 in 1999.

Much of this growth happened via investments through anonymous shell companies registered in secretive tax havens, according to Filipa Sa, the KLC senior lecturer who conducted the research. The UK government announced recently that those involved in helping shell companies to invest in British property will face up to two years in prison and unlimited fines, if the true beneficial owners of the property are not named on a public register, however, the bill has not yet been tabled in parliament.

The anaylsis of land registry data shows a direct impact on home prices of sales to overseas companies, with a rise of 1% in the share of property sales to overseas companies causing prices in the local area to go up by 2.1%.

Investment from overseas has also negatively affected homeownership rates in the UK, not only raising the price of expensive homes, but also having a ‘trickle-down’ effect on the rest of the market.

The UK's largest price increases were in London and the South-east. Overseas buyers bought 3,600 of London’s 28,000 newly built homes between 2016 and 2016, according to research commissioned by London Mayor Sadiq Khan. Half were priced for first-time buyers at between £200,000 and £500,000.

Other cities including Liverpool and Manchester witnessed a similar phenomenon.

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